midterm notes II

midterm notes II - AAA Reading Notes: Adaptation: Adjusting...

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AAA Reading Notes: Adaptation: Adjusting to differences Example: major home appliance industry – assumed needs were the same but differences and preferences varied dramatically throughout the world o CAGE: Cultural differences: national cuisines impact refrigerator needs, oven temperatures vary, etc. Administrative: variations in electric standards, protectionism cause high transport costs, etc. Geographic: climate differences affect need for air conditioning and clothes dryers Economic: most important driver of variation – income level – affects size and complexity Competitive Strategy o Most use low cost or differentiation strategy – but need to look at specifically how they will lower costs and how they will differentiate (complete localization  variation  complete standardization) o There are many ways to deal with adaptation challenges through variation by produce many different products for different regions – products, policies, repositioning and metrics o Within variation are four levers for adaptation and sub-levers: these levers and sublevers are not exhaustive or mutually exclusive but trying to do multiple can be difficult Variation – produce many different products for different regions Products Policies Repositioning metrics (volume v profitability v market share) 1. Focus to reduce need for variation – can focus on particular regions, products, vertical stages, etc. to create heterogeneity Product (particular products) geographies (minimizes geographic and administrative distance) verticals (compete on one level of value chain) segments (focus on particular consumer) 2. Externalization to reduce burden of variation – through joint ventures, partnerships, etc. strategic alliances- good for those far away from home base, provides local knowledge that would otherwise be hard to purchase but also has risks because of managerial complexity franchising –relaxes internal resource constraints on growth, increase local responsiveness and achieves innovation and promotes mutual learning but requires coordination user adaptation and networking – use consumer ideas to innovate 3. Design- reduce cost of variation Flexibility: deliberately designing business systems so as to reduce the fixed costs associated with producing different varieties Partitioning: clearly separating elements that can be varied across countries from elements that are integral parts of a complex system Platforms: cost-effective customization
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Modularity: involves defining standardized interfaces between all choice elements so that choice elements can be mixed and matched 4. Innovation to increase effectiveness of variation- improve the effectiveness of adaptation efforts Transfer: experience yields innovations or insights in one context that can be transferred to others Localization: more explicit focus on innovation in a target geography Recombination: melding elements of the parent business model with
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midterm notes II - AAA Reading Notes: Adaptation: Adjusting...

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